A new decentralized finance (DeFi) platform called Aerodrome has garnered significant attention, securing $150 million in deposits just one day after its launch. This influx of funds has increased the total value locked in Base blockchain’s DeFi ecosystem by a staggering 80%. Aerodrome, a collaborative product by Velodrome and Base developers, aims to serve as a “business development protocol” for the Base blockchain, supporting new projects, onboarding new tokens, and generating liquidity.
Modeled after the successful Velodrome platform on the Optimism network, which holds over $288 million in locked value, Aerodrome offers similar incentives. Users are rewarded with AERO tokens for providing liquidity, conducting token swaps, or participating in governance decisions. The total supply of AERO tokens is 500 million, with 450 million locked for four years and the remaining 50 million allocated for voter incentives and initial liquidity.
A distinctive feature of Aerodrome is its strategy to address a key issue with decentralized exchanges—rewards being tied to total liquidity rather than trading volume. Aerodrome’s native token, AERO, can be locked by users for periods ranging from one week to four years in exchange for veAERO, a vested form of the AERO token. The longer the lock-in period, the more veAERO tokens users receive, increasing their voting power on governance issues.
In a novel twist, these veAERO tokens are represented as Non-Fungible Tokens (NFTs) that can be traded on various NFT marketplaces. This allows users to gain exposure to the ecosystem without having to buy and lock up tokens themselves. veAERO token holders can also take part in governance decisions, such as setting the reward levels for trading pools. As an incentive, voters receive 100% of all fees and “bribes” generated by the pools they voted for.
This innovative mechanism seems to be resonating with users, creating a self-sustaining cycle of liquidity and rewards that keeps the platform running efficiently. For context, Velodrome, Aerodrome’s predecessor, generated over $3 million in platform revenues last month, with $1.3 million being distributed as fees to its users.